Different cultures mean different ways to do business, different ways to approach an issue, solve a problem, different ways to manage staff and different ways to manage the financial accounts.
You have all heard about one of the largest deals in the car industry history. The joint venture between the German car manufacturer Mercedes Benz and the American Chrysler. A lot has been written about it. On paper a great idea: using each other’s synergies to become the largest car manufacturer in the world and developing a great platform for Mercedes to confirm its US market presence and for Chrysler to develop in Europe. The new company named Daimler Chrysler was doomed from the beginning. No analysts, no consultants hired to make it work saw it coming.
First, the Germans entered this relationship with a feeling of being better, stronger and producing better cars. The Americans, disappointed about the negotiation and how Chrysler gave up on a lot of points, entered the relationship with a very negative feeling. They were not in the best spirit to make the venture work. So between the mistrust on the American side and the arrogance of the Germans, the communication did not flow. The American car industry is an institution (as is the German one), so the importance of such a deal should have been to ensure that both parties were treated the same way. It was clearly not the case.
Once the deal was done and the teams started to work together, the difficulties arose. The Germans used a privately chartered plane from Stuttgart. This was seen an invasion of the Germans by the American workers. Then, the differences started to show. The Germans being very organized, arrogant and communicating differently than the Americans (remember they thought they were superior) had a tough time understanding how the Americans were functioning. The Germans found them disorganized, individualists and not capable of producing the cars that were desperately needed to ensure a win/win situation.
This lead to the worst-case scenario, the companies split up.
How could have this venture have worked?
It is important to understand this now and with hindsight this is much easier. New ventures should learn lessons from this and avoid failing in conquering new markets. However, other companies have failed the same way and will continue to fail. All of this for one simple reason, misunderstanding of cross cultural differences.